>Hospira's plant in Ashland, which currently makes pharmaceutical-grade rubber and plastic and latex components, will be closed in 18 months time, and the company's Montreal plant, which makes intravenous solutions and other products will close 10 months later.
Hospira said the higher costs of manufacturing in the two facilities, coupled with excess manufacturing capacity elsewhere in the company, led to the closures, however, the company refused to elaborate further.
Manufacturing operations at the impacted plants will be transferred to other Hospira facilities in the US and the company will outsource certain product components to third-party suppliers.
Again, the company refused to comment on what components this would involve and where they would be outsourced.
The production transfers will result in a total job loss of 1100, after accounting for the approximately 400 new jobs that will be created at the other Hospira locations.
Hospira said it will also phase out production at a facility belonging to Abbott Laboratories in North Chicago, US, in advance of the lease's 2014 expiration, with the majority of transfers occurring over the next four years.
The North Chicago plant also currently makes intravenous solutions and has been leased from Hospira's former parent company since the spin-off in April 2004.
"To ensure long-term success, Hospira must take every step necessary to keep costs down while maintaining our high standards of quality and performance," said Christopher Begley, CEO, Hospira.
In connection with the two plant closures and the transition out of North Chicago, Hospira estimates it will incur total pre-tax expenses in the range of $95-$110m until 2009, with the total net cash outflow expected to be $58-$73m.
Hospira estimates that it will begin benefiting from these actions in 2008. Cost savings for that year are anticipated to be approximately $15 million and eventually reach annual cost savings of $30m in 2010.
The company has also announced a $60m investment to expand its manufacturing plant in McPherson, Kansas and create an additional 100 jobs in the areas of R&D and manufacturing of injectable generic drugs, as part of an ongoing market expansion in this area.